6 Book Stocks To Watch

If Amazon (AMZN) is doing so well, as sales and earnings are up substantially, a lot of books must be selling. Of course, Amazon also sells watches, handbags, DVD’s, toys, tools, and toasters, but their mainstay is books. So, if it is selling a lot of books, then the book publishers must be benefiting. Even the private equity guys are looking at publishers, as Ripplewood Holdings L.L.C. just acquired Reader's Digest in March.

Here are some of the bigger book stocks to watch:

John Wiley & Sons, Inc. (JW.A)This Hoboken, New Jersey company, founded in 1807, publishes print and electronic business, education, and technology books. A couple of its famous publishing lines include the Dummies series and CliffNotes. The stock has a P/E 22, a price/sales of 1.95, and a yield of 1.1%.

Courier Corp. (CRRC) This is one of the largest publishers of educational, religious, and consumer books in the United States. It has a P/E 17.2, a [PEG] of 3.5, and a yield of 1.7%.

McGraw-Hill Companies Inc. (MHP) It publishes education, financial, business books, and information services. It also owns Standard & Poor’s, BusinessWeek magazine and J.D. Power and Associates, in addition to several other divisions. Its P/E is 25, with a [PEG] of 1.7, and a yield of 1.2%.

Pearson plc (PSO) This London-based company publishes business and educational textbooks in the United States and Canada. It also publishes The Financial Times newspapers and The Economist magazine. It has a P/E of 24, a [PEG] of 2.1, and a yield of 3.1%.

Scholastic Corp. (SCHL) It publishes children’s and educational books worldwide. It has a P/E of 22.3, a [PEG] of 1.2, and pays no dividend.

Thomson (TOC) It publishes legal, business, educational books, textbooks, and information services. It has a P/E of 25.5, and a yield of 2.2%.

Disclosure: Author does not own any of the above.

Comments

[David Jackson:]

I love these lists; they're helpful and fun. But I'm not sure the inference from Amazon's results is correct, and this particular list is risky because -- as you point out -- many of the stocks have substantial non-book businesses.

Barnes and Noble (BKS), a better proxy for book demand as it's more of a "pure play", said on its recent conference call (see transcript):

<blockquote>Sale... at Barnes &amp; Noble stores were $4.5 billion for the year up 2% over a year ago. </blockquote>

Not so great.

Furthermore, note that Amazon never singled out books as a growth area on its conference call (see transcript):

<blockquote>In the North America segment, revenue grew 30% to $1.62 billion. Media revenue grew 21% to $990 million. EGM revenue grew 51% to $564 million, representing 35% of North America revenues, up from 30%. We saw another quarter of strong sales in electronics and revenue from soft goods, which includes jewellery, apparel, shoes and sporting goods, more than doubled year over year.

Additionally, we are pleased with the early customer response to our grocery subscription service, which offers automated replenishment plus a 15% additional discount. Some of the most popular items for subscription include diapers, nutrition bars and coffee.</blockquote...

Media sales include books, movies and music; we know that Amazon has taken share from other stores, so much of the growth might be market share gains, not market growth.

You're right that many of these stocks are leveraged to their non-book business. Peason is dominated by the perceived value of the Financial Times. McGraw Hill owns S&P and Business Week, and its book business is leveraged to the educational market. (The detailed info is in McGraw Hill's conference call transcript.)

And isn't Scholastic almost a pure bet on Harry Potter? See Paul Kedrosky's Investing in Harry Potter.

2007 May 03 01:44 AM

[Stockerblog:]

This is a great analysis. I agree that the link between Amazon's success and book publishers is tenuous, the fact remains that book readership must be up if Wiley's revenues are up 6.7%, Courier's is up 11.5%, McGraw-Hill up 13.7%, etc.

2007 May 03 09:59 PM

[Long-Short Guy:]

Related:
<blockquote>
<b>Post-Potter Scholastic May Face Shareholder Exodus</b>

After the final adventures of Harry, Hermione and Ron, Scholastic Corp. may face an exodus of shareholders if the company doesn't consider selling itself.

Investors including Mark Boyar of Boyar Asset Management Inc. say the New York-based publisher should be sold because Chief Executive Officer Richard Robinson, who has run Scholastic since 1975, hasn't used the windfall from ``Harry Potter,'' the biggest hit in books in the past decade, to build successful new businesses. Robinson said today he has no intention of selling...
</blockquote>

Source:
www.bloomberg.com/apps...;sid=atlUG0CHPbKs&...

2007 Jul 22 09:44 AM